Beyond Brexit: Britain and the global economy

International Trade Alert

On 20 July 2017 the Secretary of State for International Trade, Rt Hon Liam Fox MP, reaffirmed the UK's commitment to free and open trade in a speech to the Graduate Institute in Geneva. Whilst his speech highlighted the importance of free trade to the global economy, Dr Fox provided no further clarity with respect to advancing the UK's future trading relationship with the EU.

If a deal cannot be reached in time, trade between the UK and EU will revert to the baseline rules and commitments of their respective WTO memberships. There are a number of simple steps that businesses can take now to understand what this scenario might mean, put plans in place to mitigate the risks and ensure they can seize any opportunities.

In his speech and in parallel talks with the Director General of the World Trade Organisation (WTO), Dr Fox made the "moral case" for trade as a way to deliver jobs, technology and prosperity, as well as the transfer of cultures, ideas and scientific advances.

He also set out the clearest indication yet of the UK's priorities for its membership of the WTO post Brexit:

The digital economy: the UK will focus on securing modern and ambitious digital provisions in trade, covering e-commerce, data and telecommunications.

The promotion of trade as the main tool of development: the UK has already announced that post Brexit it will secure existing duty-free access to UK markets for the world’s poorest countries and aim to maintain current access for other developing countries which benefit from reduced or zero tariffs. The UK Government will also drive forward implementation of the WTO's Trade Facilitation Agreement, which entered into force on 22 February 2017, and has the potential to reduce trade costs by expediting the movement, release and clearance of goods, including goods in transit.

Unlocking the vast potential of the trade in services: the UK will push for the resumption of plurilateral negotiations on the Trade in Services Agreement (TiSA) which could strengthen rules and open up markets in key areas such as financial services, telecoms, e-commerce and maritime transport.

This strategy is a welcome and timely elaboration of how the UK will take forward its Brexit objective of increasing trade with the rest of the world. But what it does not do is advance the UK's discussions with its European partners on their future trading relationship once the UK has left the EU. These negotiations have not yet started, and, in the likely event that a trade deal cannot be reached in time and transitional provisions are not put in place, trade between the UK and EU will revert to the baseline rules and commitments of their respective WTO memberships.

This is the worst-case scenario, but it is not impossible. In a media interview before his Geneva speech Dr Fox said: "We don't want to have no deal. It is much better that we have a deal than no deal. We can of course survive with no deal. And we have to go into a negotiation with those on the other side knowing that's what we think."

However, there are some simple steps that businesses can take now to understand what this scenario might mean for them and to put contingency plans in place.

DLA Piper has a dedicated team of trade specialists embracing domestic and international lawyers, former diplomats, politicians and senior Government trade negotiators. We can draw on these unique skills to demystify the WTO and explain to you in clear commercial terms:

What is the WTO and the international trade framework

What are the 'bound' scheduled commitments relevant to your business

What are the tariffs and market access arrangements that will be 'applied' to your business

How do these arrangements compare to other alternative jurisdictions where you might wish to establish or operate

We advise clients on contingency planning and how they can prepare themselves for different scenarios by reviewing and future-proofing contracts, reviewing supply chains and export markets, ensuring their organisational configuration and jurisdictional locations are resilient, and that their employment, tax, property and other workstreams are structured appropriately.

If you would like further information or to discuss how DLA Piper can help you to understand and prepare for Brexit, please contact John Forrest, Head of Global Trade & Government Affairs, London, or Paul Hardy, Brexit Director.